World View & Market Commentary. Forest first; Trees second. Focused on Real & Knowable facts that filter through the "experts" fluff and media hyperbole. Where we've been, what the future may hold and developing a better way forward.

Thursday, November 4, 2010

Equity futures are blowing out higher this morning on the back of “Fed” intervention. The dollar has broken major and key support, the Euro is breaking higher out of a bullish flag, long bonds are recovering higher after a steep sell off yesterday, oil is zooming now above $86 a barrel, and gold has plastered on about $40 an ounce this morning alone.

Let’s get something straight right off the bat… the “Fed” is OWNED (literally) by private banks. They act in THEIR interest. Understanding this is key to understanding why their actions help the banks and work AGAINST the people. Simply look at the BANK STOCKS following the FOMC announcement yesterday and you will see WHO was helped by this CRIMINAL activity. Which, by the way, is BIGGER than TARP and yet has NO CONGRESSIONAL approval or oversight. In fact, Ben Bernanke in sworn Congressional testimony said, “The Fed will not monetize the debt.” And yet that is exactly what they are doing, and yes, that is PERJURY. Yes! Bernanke should be JAILED as he is inflicting SEVERE damage to our nation.

Let’s get something else straight about yesterday’s announcement… it was NOT just $600 Billion! It was $600 billion ON TOP OF QE1, but what is clever about the announcement is that the time period only runs through the end of quarter 2 of next year! QE1 and QE2 working together amount to $110 Billion per month, or $1.32 TRILLION annualized! Effectively this means that we are PRINTING the entirety of our national deficit. Remember, we only take in approximately $2.5 Trillion in taxes, this means we are printing 50% more than that out in the open.

Effectively this makes what was $10 Billion per week in POMO activity equal to $27 Billion per week! And thus the exponential growth in numbers is incontrovertible.

Why would the Fed even make these figures public? Because they can’t hide it anymore and because they WANT TO CREATE THE PERCEPTION OF INFLATION IN YOUR MIND. This is literally INSANE, it is Narcissistic Disorder at its finest. It is self-destructive as there is no way it can ever be stopped – no exit strategy. Remember Vietnam? No exit strategy. Any General worth his salt will tell you straight up – YOU NEVER ENTER A BATTLE WITHOUT AN EXIT PLAN. You MUST think at least two moves in advance. Well, we are all in battle and there definitely is no exit plan, not one that can actually work in practice.

Now, with all that I’m going to tell you that QE2 will fail as miserably as QE1! Imagine if they were to take that money and instead of using it to effectively prop up bankrupt banks, they were to refund taxes to the PEOPLE to be used to pay down their existing debt. This would not only help the people, but that money would pour into the banks with velocity, thus making the entire system healthy. That’s what is so nuts about what is going on. By giving the money to the banks, the money DOES NOT GO WHERE IT IS NEEDED. The banks use the hot money to speculate in the markets running up commodities that act as a DRAG on the economy.

Furthermore, the money WILL NOT STAY IN THE UNITED STATES! The “Fed” has now created the BIGGEST CARRY TRADE IN HISTORY. The carry trade created by Japan was HUGE, but this is WAY BIGGER. Countries like Australia are raising interest rates while our “Fed” is using trillions to artificially buy our rates down. This sets up an interest rate differential that the holders of hot money use to arbitrage the difference. They literally take the money from the United States, CARRY IT to Australia where any benefit of its use benefits THEM. This also massively pressures the price of worldwide commodities, creating BUBBLES. These bubbles circle back around to SQUICK the CITIZENS of the United States. A normal, HEALTHY deflation would make things like oil and building materials cheaper. But that won’t be allowed to happen with these CRIMINALS still in power. And least you think that the election changed all that, guess what, I’m already reading that new Republicans are talking about INCREASING spending on defense. Now there’s some kind of change to the change you can believe in!

And so, if you are one of the Americans who is underwater in your home, your retirement diminished, and you are tossing and turning at night worrying about losing your home and not having ANYTHING during your retirement, guess what… you now are facing $4 gasoline again! Here’s a daily chart of oil, it has broken a bullish flag and is making a bee line for $95 a barrel. Does it stop there?

You KNOW that this price increase is a BUBBLE in the making as the price is rising despite FALLING DEMAND. Proof once again came yesterday on the weekly petroleum report that showed FALLING OIL IMPORTS, oil refineries working at very low capacity, and RISING OIL INVENTORIES despite the falling imports. This equals falling demand, and you can see on the chart of inventories that we are approaching all time high inventory levels, breaking out of a sideways consolidation period:

And any savings you have is literally being DESTROYED.

Since June of this year, your money weighed against a basket of other depreciating currencies has now fallen 15%! And it is in process of a 5th wave down that is breaking major support. That support is the bottom trendline of a huge pennant that you can see on the monthly chart:

A break of that pennant from a technical point of view is targeting an area that is a disaster for the people of our nation. And keep in mind that this is an index measured against other countries who are also printing – it’s not measured against anything REAL. And thus the true devaluation of your money is reaching extremes, we are rapidly approaching the key area where the loss of confidence occurs.

And it’s not just our nation, obviously. Take a look at what’s happening in Ireland right now. Bonds and Credit Default Swaps are blowing out! The cost of borrowing is shooting through the roof.

And I still haven’t talked about the continuing fraud occurring in the banks that’s being ignored and swept under the carpet for now. But all these debt rooted problems have not gone away, they are festering and beginning to boil over. They are creating tensions around the globe in regards to trade, and don’t look now, but ahead of the next G20 meeting in Soul, the two Koreas are taking pot shots at one another.

And did you see the reaction of bonds to yesterday’s announcement? The long bond PLUMMETED straight down, causing long term interest rates to RISE.

What does that tell you? And by the end of this month the “Fed” will become the world’s largest holder of Treasury debt! Larger than China! And what’s clear about this is that NO ONE ELSE IS WILLING TO BUY OUR DEBT AT THIS LOW OF A RATE. Therefore, it is up to us to MONETIZE it. This is a SPIRAL from which there is NO ESCAPE. The more we print to devalue our money, THE LESS OTHERS WILL WANT TO FINANCE OUR DEBTS. The less they want to finance, the more we have to print. THIS SPIRAL WILL CONTINUE ALL THE WAY INTO A LOSS OF CONFIDENCE EVENT.

And so, let’s circle back around to stocks. Just yesterday I linked you to an article and published a chart showing that stocks are as overvalued already as they were just prior to the 1929 stock market crash - and that's based upon FRAUD. Pour more gasoline onto that fire and you ABSOLUTELY HAVE A BUBBLE. All bubbles burst. This one will be no different other than we are now creating bubbles during the end of the game.

And as I’ve always said, we must correctly recognize the fundamentals in order for the technical analysis to work. Have the fundamentals changed? Well yes, they did change back in early 2009 when mark-to-fantasy accounting fraud was allowed again, and at the same time $1.7 Trillion in QE was implemented. Since that time, stocks while not anywhere near their 2007 highs have nonetheless plowed over massive overbought, divergent, and screamingly negative market and economic signals to get us to where we closed yesterday, which was with a reconfirmed DOW Theory buy signal when the Industrials closed above the April closing high, as the Transports did the day earlier. Thus, the hot money is in fact pushing through the technical landscape, MANIPULATING the price higher. And now the amount of hot money potentially pouring into stocks and commodities just went up by 150%.

I want to note that the larger and more meaningful indices of the S&P 500 and the Russell 2000 have yet to break their April highs. That is yet another divergence, a very important one. It indicates that the hot money is effective at running up narrow ranges of the market, but is not as effective at running up the broader market.

And thus while the hot money is flooding in, I still remain extremely BEARISH on equities. They are in a bubble. They could very well scream higher into a bubble blow off – great, they are going to do so without my money going along for the ride. This is true even though I watch the markets constantly, day in and day out. I shutter to think what’s going to happen to those who do not. I personally think that the whole thing is a criminal enterprise – it is going to come to an end, and it’s going to end badly for them. I absolutely will not participate in advancing the criminal’s agenda. My goal in life is to be able to know on my death bed that I did not what was necessarily in my own best financial interest, but that I did what was right for everyone’s interest. That’s why I continue to write the truth about the economy and about the markets.

Thus you have a decision to make. Do you join the crowd in promoting and working for the creation of the private bank’s bubbles, or do you work to promote stability and sanity? I can only tell you from experience that working inside of the bubble is a wheel that will consume your life and leave you empty in the end.

There was yet another small movement of the McClellan Oscillator yesterday, thus we are obviously getting the large move called for. We produced very clean outside topping hammers yesterday that are being overrun by today’s POMO and excitement over more hot money. Meanwhile insider selling is obscene, mom and pop are forced to withdraw for the 26th consecutive week from their mutual funds, and divergences are giant sized.

Of course the currency can only be debased so far. Note that since April the dollar is down and yet stocks have yet to overall return to where they were in April. In other words, the dollar being down has NOT resulted overall in stocks rising! At best it has simply held stocks where they already were:

This type of action is the very same type of action found near almost all major tops. Once again, though, those who chose to front run the turn are getting nailed. There is simply no advantage to doing so from my perspective ever.

And we have lunatics running the show. Check out what Bernanke said about stock prices:

Easier financial conditions will promote economic growth. For example, lower mortgage rates will make housing more affordable and allow more homeowners to refinance. Lower corporate bond rates will encourage investment. And higher stock prices will boost consumer wealth and help increase confidence, which can also spur spending. Increased spending will lead to higher incomes and profits that, in a virtuous circle, will further support economic expansion.

And thus, he is going far beyond even the insane powers that Congress sold out to the private banks in the year 1913 and ever since. The current “mandate” of “low inflation” and high employment now includes high stock prices, which follow their goal of high home prices, which is supported by their extremely high levels of DEBT and FRAUD. Virtuous circle? More like DEATH SPIRAL. THROW BERNANKE IN JAIL!